Bitcoin: Thumbs Up or Thumbs Down?

THUMBS UP

Later this year, the 23,000 companies that use Fidelity to administer their retirement plans will be able to offer Bitcoint as as investment option.

“There is a need for a diverse set of products and investment solutions for our investors,” says a Fidelity spokesman. “We fully expect that cryptocurrency is going to shape the way future generations think about investing.”

THUMBS DOWN

Years ago, tech writer Glenn Fleishman thought cryptocurrency might be among the most exciting and important innovations in technology and finance. His thinking has since evolved to provisional cynicism.

"Cryptocurrency is on everyone’s lips,” he writes, "but it should be in no one’s virtual pockets. An overhyped form of imaginary value storage, it has all the disadvantages of cash, suffers from all the volatility of an overhyped penny stock, and consumes more power than a mid-sized European nation. Although it has been vaunted as untraceable, anonymous, and beyond the reach of governments, none of that is true. Law enforcement agencies have used cryptocurrency to take down crime rings, stop people from exchanging child sexual abuse material, and seize massive amounts of Bitcoin and other currencies."

Personally, I think NFTs are a speculative fad that possess useful features. Bitcoin is a speculative fad that ...?

1783 Strawberry Cent Sells For “Only” $660,000

Only four 1783 Strawberry cents exist, and only this one has a fully legible date. At a recent auction it sold for $660,000 – a handsome price, but notably less than it fetched when coins were a hot alternative investment.  In 2009, the last time the rare penny changed hands at auction, it brought $862,500.

Are Both Hawaiian War Gods Worth Millions?

Unlike regular investments – stocks, ETFs, bonds – alternative investments such as art can be difficult to value. Perhaps that's why they're alternative investments.

Current illustration: doubts about the value of a wooden statue bought at a Christie's auction by billionaire Marc Benioff for about $7.5 million and donated to a Hawaiian museum.

Is Benioff's purchase, at left, the equal of the similar statue in the British Museum at right? Or is it "the sort of thing you see in a tiki bar"?

Alternative Assets Blur Annual Returns

The average university endowment has about half its money in alternative assets – real estate, private equity, hedge funds, whatever. Over 70 percent of Yale's endowment is in alternatives. As this article from  the Yale Daily News points out, calculations of these endowments'  annual returns cannot be precise. Five or ten years returns are a better guide to actual performance – and over those time periods, Yale looks pretty good.

Seinfeld's VWs as Tangible Investments

A good number of classy collectible cars sold for less than their estimates at Gooding's Amelia Island auction. The softening in the market for tangible investments such as art apparently extends to Ferraris as well.

Nevertheless, humble VWs from Jerry Seinfeld's collection did surprisingly well.

For instance, this 1964 Camper (I love it!) sold for $99,000, at the high end of its estimate.

Seinfeld's 1960 Beetle, owned for 30 years by a school teacher and driven for less than 16,000 miles. did even better. Expected to sell for $50,000 or so, it fetched $121,000.

Volkswagens may look out of place among Duesenbergs and Aston Martins, but as this 1966 VW ad says . . .

Art as Asset Class: the New Gold?

High-priced artworks used to be collectibles. Now they're a red-hot asset class. Is the booming art market a bubble, inflated by speculators flipping paintings, that's about to burst?

Not necessarily, writes Peter Schjeldahl in The New Yorker. He cites an article by J. J. Charlesworth, a British critic who believes the very rich won't panic. Art is merely one of their alternative assets. a minor fraction of their wealth.

Indeed, today's global billionaires may see art not as a speculation but as the new gold.

[T]he most intriguing motive for the rampage of collecting involves a term unfamiliar to me: “store of value,” having nothing to do with a type of retail outlet. It is about liquidity that is vested rather than invested, and it speaks to dread. Besides being something that people buy when they already own everything else, art shares with gold and diamonds the desideratum (lacked by real estate) of being portable. Charlesworth observes that “alongside global prosperity has come a lot more political instability, and it’s in the interests of the social elite to keep their options open as to where they relocate.”

Your van Gogh is thus the equivalent of a packed suitcase kept under the bed against the morning of a telltale noise from the street outside.

Stores of value should be durable, like gold. Today's hot artworks? Maybe not so much. Consider the gilded beer carton.

Budweiser carton gilded by Danh Vo.

The carton was recycled and gilded by Danh Vo, an "early blue chip" artist popular with flippers. His unique artwork got pictured in The New York Times because Vo has a dispute with Bert Krenk, a wealthy Dutch collector. Krenk commissioned Vo to create an installation, perhaps along the lines of this one.  Vo provoked a legal battle by instead offering nothing but the Budweiser carton.

Do you think the corrugated paper box will last long enough to become an icon of our new Gilded Age?

Bunny Mellon’s Awesome “Alternative Investments”

Sotheby's went all out to market the sales of Bunny Mellon's art, jewelry and home furnishings. The effort has paid off.

Mrs. Mellon's art sold for $158.7 million, well above estimate. Last evening the sale of her jewelry and other interesting objects began. Prices often exceeded estimates by two or three times.

An apple-tree brooch crafted for her by Verdura was estimated at around $3,000. It sold for $26,250.

Said to be even bluer than the Hope Diamond, her magnificent blue diamond pendent sold for more than twice its estimate, fetching $32,645,000. (Prices include buyers premium.)

Bunny Mellon, an heiress twice over, surely had a good eye for
valuable objects. But I bet she never bought for investment. The old advice about profiting from art and collectibles – buy and hold what you like – still applies.

Investors Are Only Human

The Strange Allure of Higher Fees.

Ah, the Joys of Alternative Investments!

Wine Dealer Sentenced to 10 Years for Defrauding Clients

Cracking the Mystery of Modern Wealth

Say you're seriously rich, perhaps sublimely rich. Have you lost track of exactly what you own and what it's worth? Are you prepared to pay $50,000 or more to find out?

See Wealth Managers Enlist Spy Tools to Map Portfolios.

Note: when it comes to derivatives, private equity, venture capital, collectibles and other alternative assets, "exactly" can be a relative term.

East Is East and West Is West. Art Is Art and Money is . . .

Image via Newyorker.com

Remember the case of the dropped million-dollar vase? The vase wasn't worth anything like a million. And dropping it was sort of the theme of the exhibition. Ben Mauk explains.

Takeaway: In an age when "even gallery employees cannot distinguish between art and garbage," contemporary art may not be the ideal alternative investment.

The Rocky Road to Manderley

Someday the effort to stage an American production of the European musical Rebecca – frustrated by a scam we mentioned here – will inspire a hit Broadway farce. Meanwhile, read David Kamp's entertaining synopsis, The Road to Manderley.

Where else will you find a real-life story in which at least three key characters, plus a considerable amount of money, turn out to be imaginary?

Perils of Investing in Show Biz

From Vanity Fair:

Justin Bieber Con Artist, Who Wheedled $1 Million Out of California Investor, Faces Sentencing

Related post: Broadway's Biggest Mystery

Perils of the Art Market

Anybody who bids on "genuine Picasso prints" at a cruise ship auction, as described in Protect Your High-Net-Worth Buyers From Art Ripoffs, probably deserves what he or she gets. But art fraud isn't always obvious. Do high-net-worth art buyers need more protection?

The New York Times thinks so, citing fictitious starting bids at major art auctions and, worse, bids by third parties who have already agreed to buy a painting but who will receive a cut of the profits if they can coax an unwary collector to pay a higher price.

And why do New York art dealers almost never post the prices of works displayed in their galleries, even though they're legally required to do so?

Maybe the art market does need regulating.  Or does risk add zest to art as an "alternative asset?"

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As a public service, here's a real Picasso print.

See Nicholas Forrest: How to Spot a Fake Picasso

Broadway's Biggest Mystery

When clients find equities and bonds boring, advisers may suggest spicing things up with alternative investments: private equity, vintage Aston Martins, one-eighth of a race horse. How about backing a Broadway show?

Amazingly, The New York Times observes, otherwise sane people may think that's a cool idea.

The business of Broadway has always been cloaked in mystery. Most of its 40 theaters are run by three private organizations that operate out of public view. Producers keep deal-making under wraps. The biggest mystery of all is why so many sophisticated investors go along with business-as-usual on Broadway when few shows turn a profit.

The Times article chronicles the troubled effort to bring"Rebecca," a musical that has enjoyed success in Vienna and elsewhere in Europe, to The Big Apple. A scheduled opening last April failed for lack of funding. Miraculously, Paul Abrams, a consultant working out of South Africa, came to the rescue with the promise of $4.5 million. That must have made the show's other investors feel much better.

They don't feel better now. Just before coming up with the money, Mr. Abrams suddenly died. 

Will his estate honor his commitment? Probably not. Turns out there's no evidence of Paul Abram's death and, so far,  little evidence of his existence.

Maybe stocks and bonds aren't so dull.